EXAM MASTERLIST

Question 1

The average total cost curve will be downward sloping when

Answer 1

MC < ATC

Question 2

Economic cost is what

Answer 2

the value of all resources used to produce a good

Question 3

What is price elasticity of demand?

Answer 3

Its how sensitive buyers are to a change in price

Question 4

Why is average total cost important to a business?

Answer 4

It tells a firm what the profit per unit produced is

Question 5

When is total utility maximized?

Answer 5

When marginal utility is neither positive nor negative

Question 6

Additional pleasure from a good decreases as more of it is consumed, this is _________

Answer 6

The Law of Diminishing Marginal Utility

Question 7

Changes in short-run total costs result in changes in….

Answer 7

Variable costs

Question 8

If the demand for a product is elastic, then _______________

Answer 8

% change in quantity demanded is greater than the % change in price

Question 9

What occurs when the marginal cost curve rises?

Answer 9

Total costs will rise, when MC is positive

Question 10

In the short run, when a firm produces zero output, total cost equals

Answer 10

Fixed Costs

Question 11

What does a production function show?

Answer 11

The max amounts of output that can be produced from different combinations of factor inputs

Question 12

If two goods are complementary

Answer 12

Cross-price elasticity will be negative

Question 13

Price elasticity of demand formula…

Answer 13

% change in quantity demanded / % change in price

Question 14

The law of diminishing returns is reflected in

Answer 14

the shape of the marginal cost curve

Question 15

Cross-price elasticity

Answer 15

How consumers react to a change in a goods price

Question 16

Marginal Utility

Answer 16

The additional satisfaction received from consuming an additional unit of a good

Question 17

When the average total cost curve rises, the marginal cost curve will …

Answer 17

be above the average total cost curve

Question 18

What is likely to have a price elasticity coefficent > 1

Answer 18

Long term air travel

Question 19

Normal Good

Answer 19

Demand for a normal good rises when income rises

Question 20

Consumer Surplus Formula

Answer 20

Amount willing to pay - actual price

Question 21

If two goods substitute eachother

Answer 21

Then the quantity demanded for good x will fall with a reduction in price of good y

Question 22

The most desirable rate of output for a firm is the output that

Answer 22

Maximizes total profit

Question 23

Fixed Cost + Variable Cost =

Answer 23

Total Cost

Question 24

When a firm increases variable input w/o changing its fixed input….

Answer 24

the firm will experience diminishing returns

Question 25

Why does price discrimination work for airports?

Answer 25

Buyers do not have information about the true price

Question 26

ATC =

Answer 26

Total Cost / Amount produced

Question 27

What is a inferior good?

Answer 27

A good that experiences decreased sales when incomes increase

Question 28

What happens when MPP falls?

Answer 28

MC of each output rises

Question 29

If the sign on the income elasticity formula is positive then

Answer 29

the good is normal

Question 30

The MCC curve intersects with what other curves?

Answer 30

ATC and AVC

Question 31

Total Utility

Answer 31

How much marginal utility a good has given an individual

Question 32

When the price elasticity has an absolute value

Answer 32

the quantity demanded will decrease by that amount for every 1% decrease in price

Question 33

A good is inferior when

Answer 33

its income elasticity of demand is negative

Question 34

Accounting cost

Answer 34

Labor + Equipment + Materials

Question 35

Profit per unit is maximized when

Answer 35

ATC is minimized

Question 36

Barrier to entry

Answer 36

Obstacles that make it hard for firms to enter a market

Question 37

When will a production shut down?

Answer 37

When price is below AVC

Question 38

The demand curve confronting a competitive firm is

Answer 38

Horizontal, while market demand is downward-sloping

Question 39

Marginal Revenue is always ________ for a competitive firm

Answer 39

Constant

Question 40

Improvements to technology causes ATC to ___________

Answer 40

shift down

Question 41

Perfect Competition

Answer 41

many firms with no market power

Question 42

If a new firm opens

Answer 42

the market supply curve will shift to the right

Question 43

A perfectly competitive firm is a price taker because

Answer 43

prices are determined by several buyers and sellers

Question 44

Profit per unit

Answer 44

Price - ATC

Question 45

A monopoly realizes larger profits than a comparable competitive market by

Answer 45

Reducing production and pushing prices up

Question 46

A monopolist will find that its marginal revenue curve

Answer 46

Lies below its demand curve and is steeper than its demand curve.

Question 47

A firm maximizes profit when

Answer 47

Total revenue exceeds total cost by the greatest amount.

Question 48

What is normal profit

Answer 48

profits covering all explicit costs and implicit costs

Question 49

When technology improves, the firm's marginal cost curve shifts

Answer 49

Downward, and supply increases.

Question 50

A firm's total revenue can be determined by

Answer 50

Price times quantity.

Question 51

Which of the following does not affect marginal costs?

Answer 51

An increase in property taxes.

Question 52

If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm

Answer 52

Can increase its profit by decreasing output.

Question 53

When a perfectly competitive firm should expand output?

Answer 53

P> MC

Question 54

Monopolists set prices

Answer 54

At the output where marginal revenue equals marginal cost.

Question 55

A patent gives a firm the exclusive right to produce a product for

Answer 55

20 years

Question 56

Short-run profits are maximized at the rate of output where

Answer 56

Marginal revenue is equal to marginal cost.

Question 57

A monopolist has market power because it

Answer 57

Faces a downward-sloping demand curve for its own output.